PLANS for new laws to allow secret court hearings were in crisis last night after the House of Lords demanded a series of changes.

Peers from all parties in the Lords joined forces to vote for fundamental alterations to the Justice and Security Bill, which planned to allow civil cases involving national security to be held in secret.

Ministers have previously argued the moves are essential to allow the State to defend itself in civil cases - notably against accusations of being complicit in torture - without having to disclose sensitive intelligence material.

They say that intelligence which risks British lives must not be disclosed.

However, peers voted by 264 votes to 159 to give judges the say over the use of "closed material proceedings" - rather than obliging them to do it.

Then the House nodded through without a vote changes that would ensure that closed proceedings would be used only as a last resort, and only if the court also had considered using an existing mechanism allowing some proceedings to be secret, known as the public interest immunity system.

Lord Pannick told peers the closed courts would be a departure from the principle of transparent justice

MP Kenneth Clarke wanted changes in the law to prevent the UK becoming a "global magnet" for people seeking taxpayer-funded settlements because they know sensitive security evidence could not be used against them in court.

But the Lords backed amendments put forward by leading QC Lord Pannick, an independent crossbench peer.

Arguing for the safeguards, Lord Pannick told peers the closed courts would be "a departure from the principle of transparent justice".

The defeats set up a possible battle with the Commons unless the Government makes concessions.